Turkey: Draft Amendments Might Hinder Un-Licensed Power Generation

Last Updated: 21 December 2015
Article by Şahin Ardiyok and Tolga Turan

"Efficiency is the goal; competition is the means; open access,
restructuring and deregulation are terms sometimes
used to describe the reforms, but they are the tools to achieve it."
Sally Hunt, 20021

1. Introduction

The Energy Market Regulatory Authority (EMRA) announced a draft amendment to the Regulation on Unlicensed Power Generation (LUY) that imposes considerable restrictions on the current application of LUY. These restrictions can be classified into three:

  1. Restrictions on side-by-side applications
  2. Restrictions on the share transfers before commissioning
  3. Restrictions on distribution companies in carrying out this business.

In this paper, we will evaluate the relevance of each restriction and analyze their potential impact on the existing and ongoing projects.

2. Recollection

According to Article 14 of the Electricity Market Law, renewable power plants with a capacity up to 1 MW are exempt from license requirement, and the Council of Ministers has the authority to scale it up to 5 MW. These power plants are also eligible for feed-in tariffs identified in the Law No: 5346 for 10 years after commissioning.2 Extra feed-in tariffs are also applicable if domestically manufactured equipment is used in the plant.

The goal in this exemption is to encourage self-generation for the purposes of self-consumption, hoping that as the volume of this type of generation increases the burden on the distribution and transmission lines will ultimately be reduced. That is, self-consumption in essential in this regard. This is explicitly emphasized in Article 17/1 of LUY:

"The principle in un-licensed power generation is to meet the self-consumption needs."3

However, this principle has so far not seen as an obstacle by both market participants and the Regulator itself against plants without self-consumption. As a consequence, plants with no self-consumption have been allowed to build un-licensed power plants, and the entire volume generated has become eligible for feed-in tariffs. This has triggered discussions among the energy circles, and many people argued that in cases where commercial considerations override self-consumption needs, un-licensed power generation should not be an option and obtaining a license from EMRA should be a strict requirement. EMRA, however, adopted the opposite approach and allowed such installments.

Furthermore, although the capacity limit has been set at 1 MW, side-by-side settlements have been allowed and 5 to 10 MW projects have been put in place by the same undertakings. This has also triggered discussions among the energy circles, and such applications have been disputed within the sector and it is even argued by some stakeholders that side-by-side installments are beyond the goal of the legislation. Given the economies of scale dictated by the economics of solar power, however, it is also argued that such installments are more than necessary if the renewable targets of the country are to be met.

Last but not least, many people claimed that the available connection capacity for un-licensed power generation is being booked by the companies affiliated with the distribution companies in their respective regions. Since the allocations are being made by the distribution companies themselves, it is claimed that the independent project developers have been disfavored against the developers associated with the distribution companies.

These controversial applications encouraged a great number of investors to take advantage of this favorable tide, and people started to buy and sell projects before commissioning and even construction.

The controversy and opposition against these applications have also been intensified because of the procedural difficulties in obtaining wind and solar licenses from EMRA and costs associated with these procedures.

3. The Proposal

The proposed amendments can be seen as an attempt to address these controversies and alleged misuse of license exemption.

First, side-by-side applications to achieve more than 1 MW capacity carried out by a single undertaking are being outlawed. It is stated in the draft that only 1 MW capacity can be allocated from a transformer center to a single real or legal person or entities affiliated with them. That is, no company or its affiliates can be granted more than 1 MW capacity even if the projects are technically separate and legal personalities are legally unbundled. There is no explicit provision in the draft addressing the status of the existing projects or projects that have already secured call letters from the distribution companies. One can predict that the existing projects will not be vulnerable since the "forward applicability" is a settled rule in Turkish public law. However, the status of the ongoing projects is vague at this stage.

Second, in order to prevent the exchange of the projects and distinguish between the real investor and the manipulator, transfer of the shares of the project company is being restricted, and it is no longer allowed between the application and commissioning. After commissioning, shares can be transferred meeting certain conditions. One can justifiably argue that there are projects at the moment for which negotiations and/or due diligence processes are underway, and certain costs have already been incurred for these potential exchanges. Similarly, the status of these projects in terms of shares transfer is vague.

Third, distribution and the assigned supplier companies are being completely driven out by the un-licensed power generation business. In this regard,

  1. Direct or indirect shareholders of the distribution and the assigned supplier companies
  2. Persons working for the distribution and the assigned supplier companies or for the direct or indirect shareholders of distribution and the assigned supplier companies
  3. Legal persons who are direct or indirect shareholders of the persons under the scope of (a) and (b)

are not allowed to carry out un-licensed power generation. Again there is no explicit provision enlightening the status of the ongoing projects.

There is no provision related to the requirement of self-consumption in the proposed draft; therefore, one can still assume that projects without generating electricity essentially for self-consumption purposes are still within the scope of legal boundaries. However, one should also keep in mind that Article 17/1 of LUY is still enforceable.

4. Why Now?

Why have such restrictions become one of the hottest topics in Turkey during the last quarter of 2015? It is likely because the spread between the feed-in tariffs and the spot day-ahead prices widened in the course of 2015. The below graph depicts the spot prices and the feed-in tariff level for wind/hydro and solar comparatively.

As seen from the graph, in 2015 the average spot prices (PTF) revolved around US$51 whereas the feed-in tariffs has a constant value at US$73 for hydro and wind and US$133 for solar. The spread represents the extra revenue generated from participating within the YEKDEM portfolio. For 2016 the final YEKDEM portfolio has been announced by EMRA in 08.12.2015, and the total volume has reached 15.000 MW. Concerns on the burden that such a volume would ultimately lead turn out to be among the hottest topics in Turkish power market. The below analysis attempts to show the potential financial effects of the YEKDEM portfolio on the Turkish electricity market, based on certain assumptions.4 The extra cost will be incurred by the final customers since these costs will ultimately be passed to the final consumer prices.

These concerns on the cost of the YEKDEM portfolio also revitalized the controversies regarding the application of LUY. As of December 2015, the number of projects and their capacity is depicted in the below chart:

5. Conclusion

In summary, the expected cost of the feed-in tariff system overall triggered the discussions regarding un-licensed power generation and the formerly debated topics seem to have reemerged. There are still two points to be handled:

  1. Grandfathering the existing projects and drawing a line (call letter or construction) for securing the existing projects: This might happen during the final discussions at EMRA Board and a provisional article may be added to the draft for grandfathering purposes. This might also reduce the volume of the legal cases brought against the amendments.
  2. The draft was announced before the political crisis between Russia and Turkey, which considerably highlighted the security of supply concerns in Turkish natural gas and power sectors.5 Policymakers might reevaluate the proposed restrictions on both licensed and unlicensed power generation eligible for feed-in tariffs. The draft was also announced before the Paris Agreement through which Turkey accepted the Nationally Determined Contribution and promised to increase the capacity of solar and wind to 10 GW and 16 GW respectively until 2030.

The project owners specifically and the stakeholders as a whole are waiting to see the final version of the amendments. It might be approved by the EMRA Board as it is, or revised, or shelved entirely. We will wait and see.


[1] Sally Hunt, "Making Competition Work in Electricity," Wiley, 2002.

[2] Law on Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy

[3] "Lisanssız üretim yapan gerçek ve tüzel kişilerin kendi ihtiyaçlarını karşılamak için üretim yapmaları esastır."

[4] The average generation volumes are nameplate volumes written on the generation license. These volumes might realize lower due to several conditions such as weather. PTF prices are assumed to stay constant in USD terms during the course of 2016. It is a reasonable assumption since PTF prices might go up in TRY terms but exchange rates might as well go up (Please note the FED interest rate decision taken in 16 December 2015). It is also assumed that no extra costs such as extra taxes or fees will be imposed on YEKDEM portfolio participants by introducing new regulations.

[5] Please note that around 50 percent of total generation in Turkey is natural gas based. Thus, natural gas markets and electricity markets are inexorably intertwined.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Şahin Ardiyok
Tolga Turan
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions